Hanging out for banking results

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Australia's major banks finalised their full-year accounts yesterday amid growing investor concern about the sector's earnings outlook following a report which showed home lending slowed for the seventh successive month.

ANZ, Westpac and National Australia Bank all report their annual results in the next six weeks. The Commonwealth operates on a June year and has already released its full-year numbers to the market.

Fund managers are increasingly concerned about the prospects for Australia's banking sector as the housing market cools and price competition intensifies among the major players as they aim to protect market share.

A report by the Reserve Bank released yesterday showed that home lending grew by 18.9 per cent in August from a year ago, down from the 21.5 per cent growth recorded in January.

Westpac chief financial officer Phil Chronican described the slowing housing market as an "orderly decline" during a presentation to investors in New York last night.

But some investors have been concerned that growth in business lending will not be enough to offset the slower pace in home lending and that increased competition will cut into margins.

So far, Westpac and ANZ have been the banks to gain market share in business lending, according to statistics released yesterday by the Australian Prudential Regulation Authority.

"Westpac and ANZ appear to be growing business lending at well above system at the expense of NAB and CBA," Brad Potter, an analyst at Tyndall Investment Management, said.

However, Westpac and NAB are lagging in the home loan market.

While NAB is still suffering from the fallout of its foreign exchange trading scandal early this year, the APRA figures show it managed to claw back some of its market share in August for the second month in a row.

Still, during the past five months NAB's share of the home loan market has dropped almost half a per cent and it has lost ground in business lending and deposits.

Analysts are also tipping further write-downs for the troubled bank, with some estimates as high as $3 billion. These could include restructuring charges, software costs or a top-up of its bad debt provisions.

But Macquarie Bank analysts raised NAB to their second pick in the sector behind Westpac. They are betting that any write-downs will be lower than expected.

ABN Amro analysts said the biggest threat to bank earnings was increased competition.

ANZ yesterday lowered the fees on its fixed home loan rates and the banks have been competing strongly in the $300 billion retail deposit market, offering accounts with limited fees.